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Please note: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds mentioned in these presentations, please visit the appropriate fund performance page.

No Trade War Between the U.S. and China… Yet
April 11, 2017

Presidents Donald Trump and Xi Jinping, pictured with their wives Melania and Peng Liyuan. The two leaders met last week at Trump's Mar-a-Lago estate

Crisis averted—for now. Last week President Donald Trump met for the first time with Chinese President Xi Jinping at his luxury Palm Beach estate Mar-a-Lago, where the two leaders discussed North Korea and trade, among other topics.

Several times before I’ve commented on the implications of a possible U.S.-China trade war in response to Trump’s repeated calls to raise tariffs on goods shipped in from the Asian giant. On the campaign trail, Trump threatened to name China a currency manipulator and even suggested that, were he to become president, he would serve Xi a “McDonald’s hamburger” instead of a big state dinner.

I’m happy to say that no Big Macs appeared to be on the menu last week. Nor were there any immediate signs of a disastrous trade war. In a much-needed win for Trump, the two leaders agreed on a 100-day assessment of the trade imbalance between the world’s two largest economies. In addition, Xi pledged to give the U.S. better market access to important Chinese industries such as financials and consumer staples. Specifically, he conceded to lift China’s ban on U.S. beef imports, in place since 2003.

Perhaps Trump is the master negotiator he’s always claimed to be.

As encouraging as this news is, it will likely take a while before significant improvement can be made in balancing trade between the two nations. In 2016, the U.S. trade deficit with China stood at a staggering $347 billion, down from $367 billion in 2015.

Gold Expected to Continue Benefiting from Low to Negative REal Rates
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China’s Importance as a Trading Partner Should Only Increase

My use of the word “crisis” above was not made lightly. China is currently America’s third-largest export market after Canada and Mexico, having bought $116 billion worth of U.S. merchandise in 2016. That’s up from $19 billion in 2001, an increase of 510 percent.

The U.S., in other words, really can’t afford a trade war with such an important trading partner.

On Tuesday, the president tweeted that China would get a “far better” deal with the U.S. “if they solve the North Korean problem.” But then, it’s the U.S. that’s seeking a better deal from the Chinese, not the other way around.

Among the most valuable U.S. exports to China are, in descending order, oilseeds and grains, aerospace products and parts, motor vehicles and electronic components such as semiconductors.

Since 2010, China has been the world’s top purchaser of light vehicles manufactured by General Motors, and today it’s an exploding market for aerospace and defense companies. Between 2010 and 2015, China surpassed Japan, the U.K., Canada and France to become the number one importer of U.S aerospace and defense equipment, according to Deloitte. The Asian country spent $16.48 billion on American-made civilian aircrafts, engines and aviation parts in 2015, up more than 180 percent from five years earlier.

China Now the Number One Importer of U.S. Aerospace and Defense Boeing is currently China’s leading provider of commercial jets. Back in September, the Chicago-based aerospace company announced that China was in need of more than 6,800 new aircrafts over the next 20 years, an ongoing enterprise valued at roughly $1 trillion.

So crucial is the Chinese market that Boeing, in cooperation with Chinese aerospace manufacturer Commercial Aircraft Corporation of China (COMAC), just began construction on a Boeing 737 completion center in the island-city of Zhoushan. The center is Boeing’s first-ever overseas facility. By 2018, it should be capable of delivering as many as 100 737s per year.

Demand for health care goods and services is also set to expand dramatically as the country’s population ages. By 2030, an estimated 345 million Chinese will be over the age of 60, necessitating even more medicines, treatments and medical devices.

Once this 100-day assessment period ends, my hope is that the U.S. and China can continue to work on strengthening trade. China should continue to be a valuable partner as its gross domestic product (GDP) grows and its citizens’ incomes rise. As I shared with you in February, Morgan Stanley projects the country to become a high-income nation sometime between 2024 and 2027. Looking ahead, the Asian country could conceivably become America’s number one export market—provided Trump can hash out a better trade deal without inciting retaliatory trade blockades.

 

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link(s) above, you will be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 12/31/2016: The Boeing Co.

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Amid Global Uncertainty, Pay Attention to this Manufacturing Index
April 10, 2017

There a lot construction Zurich now

Last week I returned from Zurich, where I spoke at the European Gold Forum. Investor sentiment for the yellow metal was particularly strong on negative real interest rates and heightened geopolitical uncertainty in the U.S., Europe, Middle East and South Africa. A poll taken during the conference showed that 85 percent of attendees were bullish on gold, with a forecast of $1,495 an ounce by the end of the year.

The upcoming presidential election in France is certainly raising concerns among many international investors. On one end of the political spectrum is Marine Le Pen, the far-right National Front candidate who, if elected, might very well pursue a “Frexit.” On the other end is Jean-Luc Mélenchon, a socialist of such extreme views that he makes Bernie Sanders look like Ronald Reagan. I was shocked to read that Mélenchon has pledged to implement a top tax rate of 100 percent—and even more shocked to learn that he’s moving up in the polls. An insane 100 percent tax rate would surely return the country to medieval-era feudalism, which is just another name for slavery. All the wealth naturally goes to the very top, and corruption thrives.

South African President Jacob Zuma

It’s important to recognize that in civil law countries such as France, hard line socialism is much more likely to take hold. Just look at South Africa. While in Zurich, I had the pleasure to speak with Tim Wood, executive director of the Denver Gold Group and former associate of South Africa’s Chamber of Mines.  According to Tim, the poor government policies of South Africa’s socialist president, Jacob Zuma, is driving business out of the country and has led to the resignations of several members of parliament. Tens of thousands of protestors have taken to the streets of Johannesburg demanding Zuma to step down, especially following his firing of Finance Minister Pravin Gordhan. The rand, meanwhile, has plummeted and the country was recently downgraded to “junk” status

One of the consequences of a weaker rand has been stronger gold priced in the local currency and higher South African gold mining stocks, as measured by the FTSE/JSE Africa Gold Mining Index. Among the gold companies that have seen some huge daily moves in recent days are Sibanye Gold and Harmony Gold. 

South African Gold Stocks Rand Weakness
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South African gold stocks look very attractive in the short term. Over the long term, however, producers might find it increasingly difficult to operate efficiently and profitably in such a mismanaged jurisdiction.

 

PMIs Show Impressive Manufacturing Growth

It was an eventful week, to say the least. The U.S., for the first time, became directly involved militarily in Syria’s years-long civil war. Senate Republicans invoked the “nuclear option” to prevent a Democratic filibuster, allowing federal judge Neil Gorsuch to obtain Supreme Court confirmation. President Donald Trump met with Chinese leader Xi Jinping at Mar-a-Lago, the so-called “Winter White House,” to discuss trade and North Korea, among other issues.

And on Friday we learned the U.S. added only 98,000 jobs in March, down spectacularly from the 235,000 that came online in February. In response to this and the Syrian air strike, gold jumped more than 1 percent, touching $1,272 in intraday trading, its highest level in five months.

Fresh purchasing manager’s index (PMI) readings for the month of March were also released, showing continued manufacturing sector expansion in the world’s largest economies, including the U.S., China and the eurozone. All of Zurich was under construction, it seemed, with cranes filling the skyline in every direction. And when I flew back into San Antonio, sections of the international airport were also under heavy construction. This all reflects strong local and national economic growth in Switzerland and the U.S.

I especially like the Zurich Airport. I travel a lot, and it’s the only airport I know of where you can sit out on an open deck and watch and listen to the jets take off and land.

Panoramic Zurich Airport

The official China PMI rose to 51.8, the fastest pace in nearly five years. Because the PMI is a forward-looking tool, this bodes well for industrial metals, as measured by the London Metal Exchange Index (LMEX). The Asian giant, as I’ve pointed out before, consistently ranks among the top importers of copper, aluminum, steel and more.

Industrial Metals Tracked China Manufacturing PMI
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The U.S. Manufacturing ISM cooled slightly to 57.2, down from 57.7 in February. This still remains high on a historical basis. Because the U.S. is the number three producer of crude, following Russia and Saudi Arabia, oil prices have tended to track the country’s manufacturing index.

Crude Oil Has Mostly Tracked US Manufacturing ISM
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Trump Tackles U.S. Trade with China

Again, Trump met with China’s Xi, a man who can be considered the U.S. president’s counterpart in many more ways than one. In February, I included Xi in a list of four global leaders who have more in common with Trump than some people might realize. Last week the Brookings Institute compiled a list of the many “striking similarities” between the two men. Among other commonalities, they’re both nationalists; they’re both populists and have expressed a desire to fight corruption; they both have a rocky relationship with the press and intellectual community; and they both prioritize domestic affairs over foreign affairs.

None of this stopped Trump from being very critical of China on the campaign trail. He threatened to name the country as a currency manipulator and raise tariffs as much as 35 percent. It will be interesting to see what agreements, if any, can come out of this meeting between the two leaders.

Trump is not wrong to raise the alarm over U.S.-China trade. In 2016, the U.S. trade deficit with China stood at a whopping $347 billion. This is down slightly from $367 billion in 2015, but still a huge number. If you look at the total U.S. balance of payments since 1960, you get an even greater sense of the imbalance.

Can Trump Balance US Trade
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At the same time, world trade volume growth has improved in recent months, especially in emerging markets and Asia.

World Trade Volume Growth Headed Right Direction
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It’s important that Trump put ample thought into improvements on international trade. I’m not convinced tariffs and border adjustment taxes (BATs) are the solution. Look at what happened in the 1930s with the Smoot-Hawley Tariff Act. In an effort to “protect American jobs,” the U.S. raised tariffs on more than 20,000 goods coming into the country, many of them as high as 59 percent. Once the act went into effect in June 1930, a trade war promptly ensued and global trade all but dried up. Today, historians almost unanimously agree that the policy, which President Franklin Roosevelt later overturned, only exacerbated the effects of the Great Depression.

One of the biggest reasons why the U.S. has such a trade deficit is due to its abnormally high corporate tax rate. The country’s largest export is intellectual and human capital. Think Apple and Google, which are designs and ideas. The problem is that the dollars received in exchange for these goods and services are sitting in Ireland, or elsewhere, and are thus not counted in the official trade balance. Should the corporate tax rate decline to an average of around 18 to 20 percent, which is consistent with other developed countries, U.S. multinational companies would likely be more inclined to repatriate those profits and tilt the balance back in America’s favor.

Tax reform, therefore, is key in making sure the U.S. remains competitive on the world stage.

 

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every invest. Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of 12/31/16: Sibanye Gold Ltd., Harmony Gold Mining Co. Ltd.

The Purchasing Manager’s Index is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.  The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.

The London Metals Exchange Index (LMEX) is an index on the six designated LME primary metals contracts denominated in US dollars. Weightings of the six metals are derived from global production volume and trade liquidity averaged over the preceding five-year period. The index value is calculated as the sum of the prices for the three qualifying months multiplies by the corresponding weights, multiplied by a constant. The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals.

The FTSE/JSE African Gold Mining Index is a market capitalization weighted index.

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Gold Finds Strong Support from Negative Real Rates
April 5, 2017

7 Reasons to Be Bullish on Emerging Europe

In case you haven’t already noticed, inflation has been steadily creeping up since July. In February, the most recent month of available data, consumer prices advanced at their fastest pace in five years, hitting 2.7 percent year-over-year. March data won’t be released until next week, but I expect prices to proceed on this upward trend, buttressed by rising mortgages and costs associated with health care and energy.

One of the consequences of strong inflation is that real rates—what you get when you subtract the current consumer price index (CPI) from the nominal rate—have turned negative. And when this happens, gold has typically been a beneficiary. This is the Fear Trade in action.

Take a look below. Gold shares an inverse relationship with the real 10-year Treasury yield, which is influenced by consumer prices. When inflation is soft and the yield goes up, gold contracts. But when inflation is strong, as it is now, it can push the Treasury yield into subzero territory, prompting many investors to move into other so-called safe haven assets, including gold.

Gold Expected to Continue Benefiting from Low to Negative REal Rates
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Again, I expect consumer prices to continue rising, especially if President Donald Trump gets his way regarding immigration and trade. Slowing the stream of cheap labor from Mexico and other Latin American countries, coupled with raising new tariffs at the border, should have the effect of making consumer goods and services more expensive. Although it might sting your pocketbook, faster inflation could be constructive for gold investors.

$1,475 an Ounce Gold this Year?

In its weekly precious metals report, London-based consultancy firm Metals Focus emphasized the importance of negative real rates on the price of gold, writing that “real and even nominal rates across several other key currencies, including the euro, should also remain negative for some time.” The European Central Bank’s deposit rate currently stands at negative 0.4 percent, not including inflation, and Sweden’s Riksbank, the world’s oldest central bank, will continue its negative interest rate policy as it awaits stronger economic growth. Meanwhile, the Bank of Japan left its short-term interest rate unchanged at negative 0.1 percent at its meeting last month.

This is all beneficial for gold. Discouraged by the idea of negative rates eating into their wealth, many savers might be compelled to invest in gold, which enjoys a reputation as an excellent store of capital.

Based on the near-term outlook for real rates, as well as uncertainty over Brexit, rising populism in Europe and Trump’s trade and foreign policies, Metals Focus analysts see gold testing $1,475 an ounce this year. If so, that would put the yellow metal at a four-year high.

Central Banks Still Have an Appetite for Gold

Since 2010, global central banks have been net buyers of gold as they move to diversify their reserves away from the U.S. dollar. Although 2016 purchases fell about 35 percent compared to 2015, they still remained high on a historical basis, thanks mostly to China and Russia.

These purchases are likely to continue this year, according to Metals Focus, though at a slower rate as many banks get closer to meeting their target reserves amount.

Central Banks Have Been Net Buyers of Gold Since 2010
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Because gold accounts for only 2.3 percent of China’s reserves, as of March, the Asian country might very well keep up with its monthly purchases for some time. (The U.S., by comparison, has nearly 75 percent of its reserves in gold.)  

I’ve pointed out before that it’s reasonable for investors to pay attention to what central banks are doing. They’re diversifying their assets and, in a way, hedging against their very own policies. It would be prudent for every household to do the same. As such, I recommend a 10 percent weighting in gold, with 5 percent in bullion (coins and jewelry), the other 5 percent in quality gold stocks.

Lipper Recognizes Our Gold Fund

I believe an exceptional way to get exposure to high-quality gold stocks is through our Gold and Precious Metals Fund (USERX), which invests in precious metals mining “seniors,” or those that generally have the largest market cap in the mining sector. The first no-load gold fund in the U.S., USERX seeks not just capital appreciation but also protection against monetary instability and the very inflation I discussed earlier.

I’m very pleased to tell you that the fund was recently recognized by Thomson Reuters Lipper. In a New York City ceremony in March, the mutual fund data provider awarded USERX with two Fund Awards for 2017 in the Precious Metals Equity Funds category for the three- and five-year periods.

In January, the Gold and Precious Metals Fund was also awarded a 5-Star Overall Rating by respected investment ranking and analysis firm Morningstar, as of December 31, 2016. The fund was rated among 71 Equity Precious Metals funds, based on risk adjusted returns.

USERX is co-managed by myself and precious metals expert Ralph Aldis. The two of us were honored with the Mining Journal’s Best Americas Based Fund Manager award for 2016.

I invite you to visit the fund page for the Gold and Precious Metals Fund (USERX) to explore its holdings and performance! 

 

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.

Past performance does not guarantee future results. A high ranking does not necessarily mean that a fund had a positive return over the ranking period. See current performance for the Gold and Precious Metals Fund here.
Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in these sectors.

Morningstar ratings for the Gold and Precious Metals Fund (USERX), in the Equity Precious Metals fund category: USERX was rated 5 Stars Overall out of 71 funds, 5 Stars out of 71 funds for the three-year period, 5 Stars out of 64 funds for the five-year period, and 4 Stars out of 46 funds for the 10-year period, as of December 31, 2016.

The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

Lipper named the Gold and Precious Metals Fund the Best Precious Metals Equity Fund, out of 62 funds, for the three-year period ending 11/30/2016. The fund was also recognized as Best Precious Metals Equity Fund, out of 58 funds, for the five-year period ending 11/30/2016.   The award was earned for the fund’s consistent performance over the three-year and five-year periods ending 11/30/16.The award selection process began with Lipper calculating a Consistent Return score for each fund for the three-year and five-year time periods as of 11/30/16. Consistent Return is a quantitative metric that incorporates two characteristics: risk-adjusted return, and the strength of the fund's performance trend. The top-scoring Consistent Return fund within each classification received the awards. 

Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Users acknowledge that they have not relied upon any warranty, condition, guarantee, or representation made by Lipper. Any use of the data for analyzing, managing, or trading financial instruments is at the user's own risk. This is not an offer to buy or sell securities.

The Mining Journal’s Best Americas Based Fund Manager award is among the publication’s annual Outstanding Achievement Awards and was decided based on metrics provided by Morningstar. The Mining Journal, based in London, is a leading publication for the global mining industry.

The consumer price index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals.  The weights of components are based on consumer spending patterns.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

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Can Trump Dig Coal out of Its Slump?
April 3, 2017

Can Trump Dig Coal out of Its Slump?

Flanked by coal workers, President Donald Trump signed the American Energy Independence Executive Order last week, directing the Environmental Protection Agency (EPA) to review the Clean Power Plan, former President Barack Obama’s signature environmental policy. Unveiled in August 2015, the plan is intended to reduce carbon dioxide emitted from U.S. power plants 32 percent by 2030. Because Trump cannot directly overrule this particular regulation, the EPA must come to a finding on whether it needs to be modified or repealed.

Shares of American coal mining companies jumped in response last Tuesday. Kentucky-based Ramaco Resources closed up more than 13 percent, with impressive gains also made by Cloud Peak Energy and Peabody Energy

As expected, the executive order prompted criticism from environmentalist groups and acclaim from business leaders and workers in the energy sector. Among the media outlets that heaped praise on Trump was the Wall Street Journal’s editorial board, which wrote that the president “deserves credit for ending punitive policies that harmed the economy for no improvement in global CO2 emission or temperatures.”

I believe the editors make a valid point that Obama’s plan accomplished too little at too great expense. However, there are two points on which I might disagree with others

One, part of Trump’s goal here is to make America energy-independent, as the order’s name implies. Free of burdensome regulations, it’s believed, U.S. energy can be unleased, and we can become a net-exporting nation. The truth is that the U.S. has never been so energy-independent as it is now, even in the face of strict Obama-era rules and regulations. In January, the Energy Information Administration (EIA) forecasted that, even with the Clean Power Plan in place, the country would be a net energy exporter by 2026. Trump’s executive order is unlikely to move that target significantly. And remember, thanks to fracking and the recent lifting of a 40-year ban on oil exports, the U.S. is now a net petroleum exporter.

Two, Trump’s efforts are seen as benefiting the coal industry the most, but I think there are greater forces at work than regulations, as restrictive as they’ve become.

Where Have All the Coal Jobs Gone?

To be clear, I don’t think anyone sincerely believes Trump can “save” coal or coal miners’ jobs. We can probably all agree, however, that he’s at least seeking a way for the coal industry to do what it can to compete with other forms of energy, including renewables and fracking. Coal might very well continue to lose share in the U.S. even after regulations are lifted. That’s fair. But it will be the free market making the choice to retire coal, not government officials.

It’s important to recognize that coal faces several challenges that deregulation won’t be able to block. For one, the fracking boom flooded the market with cheap natural gas, compelling many U.S. power plants to make the switch from coal to gas. Thanks to fracking, gas and oil production now outpaces coal production. By 2040, natural gas will account for 40 percent of U.S. energy production, and renewables will have a larger share than coal, according to EIA estimates.

Can Trump 'Save' Coal?
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Take a look at the 114-year history of the coal industry in West Virginia, the second-largest U.S. coal producer after Wyoming. Since shortly after World War II, the number of coal mining jobs has steadily decreased. In 2014, the state industry employed a little over 18,000 people, a far cry from the 125,000 it employed in 1948.

West Virginia Coal Employee-Production Gap
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Interestingly, though, annual production levels since 1948 have remained within a 100-million-ton range. This suggests that, like fracking, better and more efficient mining tools and methods have offset the need for so many workers. More is done with less. It’s safe to say we can’t wholly blame regulations for the decline in coal jobs.

Growing Demand in Renewables

Also working against coal is the rising demand in renewable energy, specifically solar. This is reflected in the growing number of jobs in solar energy installation, to say nothing of solar manufacturing, project development, and sales and distribution. In 2016, more than 137,000 people were employed in solar installation in the U.S., compared to a little over 50,000 people in coal nationwide.

U.S. solar energy installation jobs now outnumber coal mining jobs
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According to the Solar Foundation, the industry accounted for one out of every 50 new U.S. jobs in 2016, the fourth consecutive year in which solar employment grew more than 20 percent.

As I’ve written about before, the surge in solar demand is a boon for copper, necessary for the conduction of electricity, and lithium, used in lithium-ion batteries to store the energy.

Consumers More Confident Than at Any Time Since 2000

President Trump’s policies aren’t just exciting coal workers. Consumer confidence rose sharply to a 16-year high in March on an improved jobs market and the potential for robust economic growth. The Conference Board’s Consumer Confidence Index hit 125.6, its highest reading since January 2000 during President Bill Clinton’s final days in office.

U.S. consumer confidence surges to a 16-year high in march
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This comes as optimism among CEOs and business owners stands near all-time highs as well. In December, the month after the presidential election, the National Federation of Independent Business’ (NFIB) Small Business Optimism Index soared to 105.8, up from 98.4 in November, a 12-year high. Since then, the index has held above 105, indicating that, despite recent legislative and judiciary setbacks, Trump’s pro-growth agenda  continues to excite small business owners.

Gold on the Mind

Holmes on CNBC

Tomorrow, April 4, I will be speaking at the European Gold Forum in Zurich, Europe’s most prestigious gold and silver investing conference.

In the meantime, I had the pleasure to sit down with Louisa Bojesen, anchor for “Street Signs” at CNBC International’s London location. We discussed gold’s relationship with negative real interest rates both in the U.S. and U.K., South African gold mining stocks and fiscal policy in the States, among other topics. You can watch the interview here.

 

Some links above may be directed to third-party websites. U.S. Global Investors does not endorse all information supplied by these websites and is not responsible for their content. All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every invest.

The Consumer Confidence Index (CCI) is an indicator which measures consumer confidence in the Economy.

The National Federation of Independent Business’s (NFIB) Index of business optimism is based on responses from 1221 member firms.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 12/31/2016.

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7 Reasons to Be Bullish on Emerging Europe
March 28, 2017

7 Reasons to Be Bullish on Emerging Europe

1. Eurozone PMI at a Six-Year High

For the month of March, the preliminary purchasing manager’s index (PMI) for the eurozone reached 56.7, its highest reading since April 2011. Significant gains were made in new work and backlogs of work, employment and service sector job creation.

Eurozone PMI and GDP Holding Steady
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2. European Economic Sentiment Holding Above Its Long-Term Average

For the month of February, the Economic Sentiment Indicator (ESI)—which measures industrial confidence, services confidence, consumer confidence, construction confidence and retail trade confidence—posted a score of 108, safely above its 26-year average of 100.

Europe's economic sentiment indicator still rising above its long-term average
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3. Emerging Europe Manufacturing: Full Speed Ahead

When Western Europe is performing well, Eastern Europe typically benefits by proxy, as the latter exports to the West. With a thriving manufacturing industry that’s attracted top international corporations such as Mercedes-Benz, GM, Audi, Bosch, Lego and Nestlé, just to name a few, Hungary led all others in February, posting a PMI of 59.5.  

Emerging Europe Manufacturing SEctor Looks Strong
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4. The Migration Crisis Has Abated

Mediterranean sea arrivals into Europe have fallen to 2,731 a month, from a high of 220,000 in October 2015. This is important because concerns of immigration and terrorism have largely driven recent secessionist and anti-European Union sentiment, most notably among far-right hopefuls such as the Netherlands’ Geert Wilders and France’s Marie Le Pen.

Refugee Crisis is an Overstated Risk
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5. Trump and OPEC May Have Helped Russian Stocks

The election of President Donald Trump, who has repeatedly praised Russia and its leader Vladimir Putin, as well as crude oil production cuts by the Organization of Petroleum Exporting Countries (OPEC), may have helped Russian stocks shrug off recent declines in the price of Brent oil. With the country coming out of recession, BCA Research just overweighted Russian equities, the ruble and credit relative to other emerging European states.

Russian Stocks Shrug Off Brent... Trump to Thank?
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6. Poland Making Good on Promise to Support Families

The Polish economy has lately benefited from increased social spending and wage hikes. The government delivered on its Family 500+ program, giving each family with more than one child 500 PLN ($130) per child per month. This has doubled some families’ disposable incomes and led to a recent surge in new private housebuilding starts. What’s more, Poland is currently experiencing a baby boom, which should support economic growth in the years to come.

Private Housebuilding Starts in Poland Have Recovered Strongly
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7. Attractive Valuations

Finally, European stocks look very attractive compared to U.S. stocks, down slightly more than one standard deviation. This should be especially enticing for investors who believe American stocks are too expensive right now.

Euro Area at Historically Inexpensive Valuations
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All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

The Purchasing Managers' Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

The Economic Sentiment Indicator (ESI) is a composite indicator made up of five sectoral confidence indicators with different weights: Industrial confidence indicator, Services confidence indicator, Consumer confidence indicator, Construction confidence indicator Retail trade confidence indicator. The economic sentiment indicator (ESI) is calculated as an index with mean value of 100 and standard deviation of 10 over a fixed standardized sample period.

The MSCI Russia Index is designed to measure the performance of the large and mid-cap segments of the Russian market. With 21 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Russia.

The MSCI Europe Index is a free float-adjusted market capitalization index that is designed to measure developed market equity performance in Europe. As of September 2002, the MSCI Europe Index consisted of the following 16 developed market country indices: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

The Shiller PE ratio, also known as the P/E 10 ratio, is a valuation measure, generally applied to broad equity indices, that uses real per-share earnings over a 10-year period.

Standard deviation is a measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is also known as historical volatility.

Holdings may change daily. Holdings are reported as of the most recent quarter-end. None of the securities mentioned in the article were held by any accounts managed by U.S. Global Investors as of 12/31/2016.

Share “7 Reasons to Be Bullish on Emerging Europe”

Net Asset Value
as of 08/18/2017

Global Resources Fund PSPFX $5.45 0.01 Gold and Precious Metals Fund USERX $7.39 0.03 World Precious Minerals Fund UNWPX $6.49 0.08 China Region Fund USCOX $10.12 0.05 Emerging Europe Fund EUROX $6.76 0.03 All American Equity Fund GBTFX $23.63 -0.22 Holmes Macro Trends Fund MEGAX $19.35 0.02 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change